Much to the bears’ growing frustration, equity markets have been relentless in their continued ascent. The Fed helped the bulls regain their upward momentum on Wednesday when it made it clear that policymakers are in no hurry whatsoever with regards to raising interest rates.
In light of the Fed’s re-iteration that it will be cautious when it comes to hiking rates, investors responded by increasing their risk appetite in the market. Amid the renewed sense of optimism on Wall Street, we feel the time is right to consider scaling into some beaten down commodity producers. More specifically, we’re focusing our attention on two large cap mining stocks, both of which have endured steep downturns in recent months, but appear ripe for a rebound.
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The stocks included here are rated as “buy” candidates because they have neared major support levels which they have formerly rebounded from. Nonetheless, these securities are still risky because they are trading below their respective 200-day moving averages; as such, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Freeport McMoran (FCX)
This stock has come under stiff selling pressures since peaking under $40 a share in early June of last year. Since then, shares of FCX have fallen along a steep downward-slopping trend line (red) with oil’s decline only adding to the pessimism surrounding this commodity producer. Recently, buyers have returned to the mining sector as evidenced by FCX managing to settle above the $17.50 level (blue line) on two occasions. With FCX managing to break its streak of lower-lows, we feel this is a lucrative buying opportunity for anyone eager to get long in anticipation of a rebound over the coming months, while still being able to closely monitor their downside risk.
Be sure to utilize a tight stop-loss between $17 and $16 a share in case profit taking pressures return.
BHP Billiton (BBL)
BBL’s price chart boasts a similar pattern to that of FCX’s; this security has endured a steep decline (red line) and is now showing signs of a potential rebound after breaking its streak of lower-lows. Shares of BBL have previously rebounded off support near $40 a share (blue line) which makes current levels attractive for anyone betting on a trend reversal to the upside. If you do wish to go long BBL, be sure to utilize a tight stop-loss around $40 a share, because while this support level has held thus far, there’s no telling if steeper selling pressures will make a comeback.
Disclosure: No positions at time of writing.